Paul Burchett v The Commissioners for HMRC
[2024] UKFTT 121 (TC)
Jonathan Harwood v The Commissioners for HMRC
8 December 2023
[2024] UKFTT 46 (TC)
First-tier Tribunal
A man appealed tax bills related to the High Income Child Benefit Charge. He said he didn't know about the charge and didn't get important letters from the tax office. The court agreed he didn't know and canceled some of the tax bill and all the penalties because he had a 'reasonable excuse' for not paying earlier.
Key Facts
- •Appeal concerning High Income Child Benefit Charge (HICBC) for tax years 2016/17 to 2018/19.
- •Assessments totaled £5,752, penalties £1,150.40.
- •Appellant's wife claimed child benefit; forms contained information about HICBC.
- •Appellant's income exceeded £50,000 due to salary and car benefits.
- •Appellant did not receive HMRC's 'nudge' and 'final reminder' letters.
- •HMRC discovered tax insufficiency on 22 April 2021.
- •Assessments and penalty assessments sent to incorrect address.
- •Appellant appealed penalties on 22 June 2021, assessments on 4 November 2021.
- •Appellant argued unfairness of HICBC legislation and lack of awareness.
- •Appellant claimed reasonable excuse for not notifying HICBC liability.
Legal Principles
HICBC is a free-standing charge to tax; discovery assessments are permissible under amended section 29 TMA following HMRC v Jason Wilkes [2020] UKUT 0150 (TCC).
Wilkes and Section 97 Finance Act 2022
HMRC can raise HICBC discovery assessments within 4 years or, if due to failure to notify (section 7 TMA), within 20 years (unless reasonable excuse under section 118(2) TMA).
Sections 34(1), 36(1A), 7, and 118(2) TMA
Penalties for failure to notify under Schedule 41 Finance Act 2008 are 30% of potential lost revenue (unless deliberate or concealed, with reductions for prompted disclosure or special circumstances). Reasonable excuse negates penalty liability.
Schedule 41 Finance Act 2008
Reasonable excuse for failure to notify assessed objectively considering taxpayer's knowledge, acts, omissions, and circumstances (Christine Perrin v HMRC [2018] UKUT 156; The Clean Car Co Ltd v C&E Commissioners [1991] VATTR 234; William Archer v HMRC [2023] EWCA Civ 626). Ignorance of the law can constitute a reasonable excuse.
Perrin, Clean Car Co, Archer
Outcomes
Appeal against HICBC assessments for 2017/18 and 2018/19 dismissed.
Assessments made within 4 years; appellant's income exceeded £50,000.
Appeal against HICBC assessment for 2016/17 allowed.
Assessment made outside 4-year time limit.
Appeal against penalties allowed.
Appellant had a reasonable excuse for failing to notify due to non-receipt of HMRC letters and lack of awareness of HICBC liability. He acted without undue delay upon becoming aware.